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The hedging performance of green bond markets in China and the U.S.: Novel evidence from cryptocurrency uncertainty

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  • Zhong, Yufei
  • Chen, Xuesheng
  • Wang, Chengfang
  • Wang, Zhixian
  • Zhang, Yuchen

Abstract

Analysing the green bond's hedging performance against cryptocurrency uncertainty is essential to maximising investment returns. The study innovatively uses the TVP-SV-VAR process to capture the time-dependent connection among cryptocurrency uncertainties and the green bond markets in China and the U.S. The quantitative outcomes present that cryptocurrency policy uncertainty (CPU) has favourable effects on China's green bond (CGB), often evidencing the property of China's green bond to hedge against cryptocurrency uncertainty. However, CPU's adverse and insignificant impacts on CGB refute this opinion. CPU has negative effects on U.S. green bonds (USGB) most of the time, which underlines that the U.S. green bond market is not an effectual safe haven against cryptocurrency uncertainty. By comparison, China's green bond has better hedging performance than the U.S. one regarding the uncertainties in the cryptocurrency market. Additionally, various time points accompanied by massive undulations in CPU and critical incidents exhibit interrelations among CPU, CGB and USGB. Further, we replace CPU with cryptocurrency price uncertainty (CPRU) to examine the robustness and confirm that the reported results and corresponding discussions are credible. Under the severe cryptocurrency risks, the conclusion offers significant implications to investors and relevant policymakers.

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  • Zhong, Yufei & Chen, Xuesheng & Wang, Chengfang & Wang, Zhixian & Zhang, Yuchen, 2023. "The hedging performance of green bond markets in China and the U.S.: Novel evidence from cryptocurrency uncertainty," Energy Economics, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:eneeco:v:128:y:2023:i:c:s0140988323006928
    DOI: 10.1016/j.eneco.2023.107194
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    Cited by:

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    More about this item

    Keywords

    Green bond; Hedging performance; Cryptocurrency uncertainty; Time-dependent; China; The United States;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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